--> Score Needed for HE Loan?

Discussion in 'Credit Talk' started by FedUp2003, Aug 9, 2003.

  1. FedUp2003

    FedUp2003 Well-Known Member

    Anybody know what kind of score is needed for a Home Equity loan?

    My Credit Union is now offering HE loans at 3.75%, and they have an option to draft the montly payment directly from your checking account each month, and it gives you an extra 1/4% discount on the rate.

    The loan will be to pay off CC debt, and by so doing will lower my payments needed for the CC's from about $300 to a HE loan payment of about $120, and will be paid off in about 4.8 years vs. 25-30 years for the CC's.

    I pulled a TU score through eloan.com and had 599, and the Equifax through PG was 564.

    This probably is not good enough, huh?

    Maybe my true FICO is higher, but I feel I should try to clean up my CR a little first and then buy a true FICO, as I feel I'd just be wasting my money right now.

    Or, can you get by with lower scores when it is a HE loan, since it's secured by the house, and does it help to agree to have the montly payment drafted from my checking ... or does that not matter?

    Just looking for a way to pay that damn blasted high interest CC debt off!!!!

  2. too much

    too much Banned

    Why would you want to trade unsecured debt for secured debt?

    Is it worth risking your home to save money in interest?

    Just get a plan to pay off the CC debt and stick to it. Do it as fast as possible.

    Rememeber, if you lose your job and cannot pay the 2nd mortgage(home equity loan), you'll lose your house.

    If you lose your job and cannot pay the CC bills, you just get a lot of phone calls from collectors.
  3. DHK

    DHK Well-Known Member

    Oh god! Get over yourself and just answer with the Facts that the poster is looking for! Sheesh!

    Questions to ask the credit union: Is it risk-based pricing? How does LTV (Loans to Value) impact the application? Is the rate for 70%, 80, 90 or 100% LTV? If it is risk-based pricing, what are the determining factors? (Usually Debt to income, annual income, credit scores, etc.)

    Remember that the risk only comes in if you don't plan on paying back the creditor. This is one reason that Home Equity lines of credit are so popular. The minimum payment is often interest only, so it is usually a VERY small payment compared to the balance.

    Scores needed for Home Equity often vary. To get the BEST rates, you'll definitely want Tier 1 or 2 credit score (read: over 700). However that doesn't mean that you won't get a home equity. It just means you won't get the best pricing.
  4. too much

    too much Banned

    Re: Re: --> Score Needed for HE Loan?

    All those years at Wells Fargo has taught you one thing: Lend 'em all they can qualify for....who cares if they will never pay down the principal.

    Of course interest only loans are popular... do you know why? Hint: It's not the reason that WF taught you.
  5. DHK

    DHK Well-Known Member

    Re: Re: Re: --> Score Needed for HE Loan?

    Without attacking me, Wells Fargo or even you, I will answer with FACTS - not opinions.

    Of course interest only loans are DANGEROUS - to the undisciplined. If you make the interest payment only for 10 years, you still owe the original loan amount 10 years later!

    What do you gain? tax deduction for the interest you DO pay, financial flexibility (with the knowledge that interest only payments do NOT pay down principle), a HUGE line of credit that "can" be used for financial leverage for purchasing rental properties.

    I recommend the HELOC for debt consolidation IF it also includes a CHANGE IN BEHAVIOR! (Don't we agree on a lot of things?) Get rid of ALL (but 1 or 2) credit cards. The DEBT is then refinanced into a lower interest loan than higher interest rate CC.

    The danger can still become a vicious circle: "accumulate debt, get HELOC to pay off, accumulat more debt, get HELOC to pay off - now stay in house and never pay it off."

    I don't understand why you put others down while they are trying to get FACTUAL INFORMATION to make the BEST DECISION they can make under their circumstances?

    We don't have a MORAL obligation to warn others (unless asked). We do want to share pro's and con's about courses of action, but let other people determine what is best for them.
  6. the other

    the other Well-Known Member

    Re: Re: Re: --> Score Needed for HE Loan?

    Great post David!
  7. DHK

    DHK Well-Known Member

    Re: Re: Re: --> Score Needed for HE Loan?

    bumping to the top for more info and posting!

    GEORGE Well-Known Member

    Re: Re: Re: --> Score Needed for HE Loan?

  9. Nestea

    Nestea Well-Known Member

    Re: Re: Re: --> Score Needed for HE Loan?

    self serving bump
  10. FedUp2003

    FedUp2003 Well-Known Member

    Thanks for the comments david, and for the others who didn't quite understand my first post....

    I DO intend on paying this back, and I'm not looking just to swap unsecured debt for secured debt - I'm looking to get OUT of debt - no matter what kind.

    To summarize, I worked for that crooked long distance phone company Worldcon (now dba MCI) and when Bernie and Sullivan got caught fleecing not only it's customers and America of some $9 Billion or $11 Billion in accounting fraud, they also screwed their own employees. Well, back in 2002 when around 17,500 prople got laid off, I was one of them - my whole dept was shut down.

    The whole IT industry went downhill, and I could not even get an interview for 7 months, much less a job.

    I finally got a job after 7 months, the only offer I had, so I took it, although I'm now making $13,000 LESS than before.

    So, now maybe you can understand my situation a little better.

    You try going un-employeed for 7 months and then when you do start working it's for $13K less, not to mention any medical or dental benefits still took another 3 months to kick in, and with 2 younger teenage kids that I'm raising by myself (get no support money from their deadbeat mom) and you might understand why I got into debt and into CC trouble - mainly, maxing them out.

    I had some 30 day lates cause I was doing this incredible juggling act, and still am. I tought I had done the right thing about half-way through this whole ordeal, and called some of the CC banks and explained my situation and asked if they would let me pay interest only for a few months, or if they would reduce my APR or my minimum payments for a while until I became employeed again.

    Trying to be responsible and do the right thing (versus as some here have judged me to be the opposite), and instead of them working with me, instead they jacked up my rate as high as the State Statutes here allow and closed my accounts.

    So, now I have several CC's that are maxed out and at rates of 29.9%, and because of my reduced income, I can barely make the minimum payments each month, and when something happens like needing to take a kid to the doctor or buy them a new pair of shoes or clothes, then invariably it seems that one of the CC's gets paid late.

    Now, paying just the min. each month on the CC's, it will take around 25-30 years to pay them off. If I get a HE loan, I can payoff this ******* CC companies, plus trade 29.9% rates for hopefully 3.75% rates.

    And no, I'm not just getting myself in deeper or possibly setting myself up to not be able to pay it, I'm instead trying to put myself into a position to make it easier to ALWAYS make the payment because it will be LOWER than the combinded CC payments, see?

    And as I mentioned, I will elect the option to have the HE loan payment drafted from my checking account each month.

    As alway, TooMuch likes to jump to conclusions and judge everyone before he/she actually understands the situation. Instead of trying to answer the question at hand, he/she would rather make snap judgements and then criticize someone for the wrong move they are attempting to make or are considering.

    Again, would it not be smart to trade debt at 29.9% and montly payments for around $300-325 that will last for 25-30 years, for debt at 3.75% or 4.0% and $120 a month payment that will be PAID OFF in 4.8 years???

    My main question still remains, would I even be able to get a secure HE loan, esp. at 3.75%, or if I can get a loan, if the advertised rate is 3.75% then what might I expect to get?

    If there is not a good chance to get the loan then I don't even want to apply cause I don't want the Hard Inq on my CR unless I knew I had a good chance of getting the loan.

    Any comments/ideas/suggestions out there?

  11. GEORGE

    GEORGE Well-Known Member

    Re: Re: Re: --> Score Needed for HE Loan?

    My bank has an ad in todays paper for a HOME EQUITY LOAN...1% off for payments dedited from checking or savings...

    It is currently PRIME + 0.25%

    That would be 3.25%

    Couldn't read any other FINE PRINT
  12. FedUp2003

    FedUp2003 Well-Known Member

    Some really great rates out there right now, and this is what's killing me. Because of the unfortunate circumstances I've been through in the past year, my scores really suck and my credit has been dinged up.

    I could probably get 1 or 2 accounts updated to better-looking tradelines by writing some goodwill letters and doing some disputes, but this will probably take several months or more, and the full impact of any score increase will probably take even a little longer.

    I'm chomping at the bit right now, wanting to get a good HE loan and get out of CC debt, but I'm worried my scores are too low and by the time they are good enough the rates will be back up.

    I checked with WK and their weird system scored me a 10, and I pulled the free score from the eloan.com site (I think they pull TU, not sure of FICO or FAKO) and that was 599, and with PG, they pull Equifax I think, again not sure of FICO or FAKO, and it was 564.

    Hopfully my real FICO from myFico.com would be around 600, but you just don't ever know. I'm not sure I want to pay for one yet, until I know I've worked on my credit repair some ... but maybe I should go ahead and pull it just to see where I'm starting from.

    Either way, wondering if I can get a HE loan from my credit union with scores around 564 to 600 or so ... and they pull Equifax. If I could get a HE loan but not at best rate, what kind of rate could I expect? I just don't want to go an apply if it's going to be a slam dunk NO!



    Would it help if I were to tell them that I'll agree to the drafting of the loan payment from my checking account, and to explain to them that my repayment history will become a lot better once I get the HE loan cause the total montly payment will be more than half, etc .....
  13. FedUp2003

    FedUp2003 Well-Known Member

    Cause I can go from 29.9% and 25-30 years to pay it off making min payments, vs. 3.75% to 5.0% and take 4.8 years to pay off making min. payments.

    Yes. What's it worth to be out of debt n 4.8 years vs. 25-30 years?

    The HE loan IS my plan.
    If I lose my job, wouldn't that mean I also couldn't pay the First mortgage, and I'd lose the house anyways? Read my other posts and you will see that this IS what happened, I lost my job, but to keep from losing the house I had to live off CC's for a while. Now I want to pay those off and get out of debt. Because new job pays much less, I can't just simply "snowball" my credit card payments and get out of CC debt that way, I need another method.

  14. GEORGE

    GEORGE Well-Known Member


    "IF" I get a HOME EQUITY LOAN @ 3.25% with checking debit...do I have to ask for an "EXACT" amount $XX,XXX...or would they say you can have "UP-TO" $XX,XXX...I ask because they would just deposit the amount into my checking account and I could pay XXXXX card...XXXXX card....XXXX card...BUT I COULD SEND A "FEW" EXTRA BUCKS TO PAY DOWN THE MORTGAGE WITH-OUT THEM KNOWING...I didn't want to do a RE-FI...with all the GARBAGE that goes along with it...and the paper said it "MAY" be too late..."MORTGAGE RATES REACH HIGHEST LEVEL IN A YEAR"

  15. DHK

    DHK Well-Known Member

    Re: Re: --> Score Needed for HE Loan?

    There are 2 main home equity products out there: Home Equity Loans and Home Equity Lines of Credit.

    If you know the EXACT amount you need and you know what type of payment you can afford, I'd go with the Home Equity Loan. Home Equity loans Home Equity loans tend to be FIXED rates for the LIFE of the loan. Same tax-deductibility and everything, but 1 fixed payment per month for a set term and a set interest rate. Based on the information provided, I would probably go this route - even though the rates on LOANS are typically higher (currently about 6.5% to a max of about 8.5%), they are FIXED. I would use the Home Equity Loan product to pay off your debts as they are now. (Don't forget the change in behavior as it may apply to your situation so history might not repeat itself.)

    Home Equity Lines of Credit are most often VARIABLE rates. They can go up and down with the WSJ PRIME (Currently at 4.0%). The most important question is: What will my margin be? The bank has to make money, so how much on top of the prime rate will the bank charge you to borrow these funds? Shameless commercial: Wells Fargo is currently offering HELOC's at a rate of Prime - 0.01 = 3.99% with certain requirements.

    Other Alternatives: Some banks are doing a loan conversion option within HELOC's. For example: Let's say you have a $100k HELOC. You need $50k to pay off unsecured debt and would like THIS $50K fixed for a period of time with a fixed payment. You can do that. At the same time, as you pay off the Fixed rate portion, more credit becomes available to you.

    As far as the credit check goes - IT WILL ALWAYS BE A HARD INQUIRY. This is to get the most recent reported information regarding your credit history, mortgage loan balances, etc. In addition, you may be asked to supply YTD paystubs, 2 years tax returns, homeowner's insurance declarations, HUD-1 and Fixed rate note info from 1st mortgage, etc.

    Hope this helps!
  16. DHK

    DHK Well-Known Member

    Re: Re: --> Score Needed for HE Loan?

    If applying for a new Home Equity product, I would STRONGLY suggest that you LOOK CLOSELY AND CONSIDER CREDIT LIFE/DISABILITY INSURANCE. This is an additional insurance product that would affect THIS PRODUCT ONLY in the event of involuntary unemployment, disability or even death.

    Most people pass up on this because of the expense, but if needed, could save your home!

    Rates for such insurance range from about 8.5c to 14.5c per $100 carried on a balance. Yes, this is usually not the best thing for EVERYONE, but you may want to consider this should the WORST happen to you (again ref: worldcom). Remember that your life insurance policy MAY NOT be there for you in the event of disability or unemployment. Credit Life/disability insurance WOULD be there and make your minimal payments FOR you.

    Just another thought!
  17. FedUp2003

    FedUp2003 Well-Known Member

    Thanks david.

    I knew about most of that stuff as far as what documents were required and such. As a matter of fact, I had went to Wells Fargo back in June of 2002 to get a HE loan, and they suggested back then I go with the HE LOC, and submitted all the paperwork, etc ... and was approved for about $7,500 (I didn't have a whole lot of equity yet, esp. since this was a VA loan on 1st ...) and I was to go down and sign the final papers and have everything completed, on the SAME day I received the pink slip.

    I could have still gone down and signed the paperwork and got the loan, but I was pissed, scared, and just plain knocked on my A$$ from the layoff, so I did not go through on the loan. I was going to use it for same purposes, to pay off some debt and do a little work to the house (add a patio and privacy fence.)

    I'd rather have the HE loan, not LOC, cause I know exactly what I want to do with the money, pay off the CC's.

    I thought I was certain that the 3.75% was on a HE loan and not line of credit, but maybe I was wrong.

    Either way, I was able to calculate the monthly payment on the credit union's website, so I figured it was a HE loan.

    I know a Hard Inq will be pulled, my point was that if there was no chance of being approved with scores as low as mine, then I did not want to even try because I don't want to take the HArd Inq on my CR's when I know I'll be denided - cause all it will do is lower my score even more.

    I don't mind taking a Hard as long as I know I have a fairly good chance of getting the loan.

    My credit union will only go as high as a 90% LTV on their HE loans.

    I'm basically just wondering, if I get the monthly draft option, this being a secured loan, and showing them or telling them that my intent is to pay off higher interest CC's with XXX amount montly payment in place of this HE loan at a much lower APR and lower payment, if that would help overcome the low credit scores I have - or would I probably not be approved no matter what I told them, given my FICO is probably somewhere between 564 and 600-600-605.

  18. DHK

    DHK Well-Known Member

    I'd just ask them up front what type of scores they are looking for and from which bureau. Then check it out for yourself first.

    If you have recent derogatory credit, it will be against you and you MAY have an immediate decline (at least with Wells Fargo for sure).

    Ask your credit union if you could get a "preliminary look" at your credit if you will supply the most recent credit report from the website and FAKO score supplied. See if they might work with you based on that information. Tell them that you are hestitant to apply yet unless there is a good chance for approval.

    FYI: Wells Fargo looks for a minimum 620 FICO from Equifax for up to 80% LTV; 680 FICO for up to 100% LTV. Credit unions are well known for being more lenient on extending credit - even with recent credit challenges.
  19. FedUp2003

    FedUp2003 Well-Known Member

    That's a great idea!

    For some reason I have this embedded idea that the loan reps won't talk to you without you filling out a loan application first.

    Maybe I can find someone who will take a "preliminary" look at a CR I pull myself from Equifax, and just ask for their "opinion" or something. Hopefull since this is a Credit Union they will be willing to do that.

    I guess back last June my scores must have been between 620 and 680 because I was given a 90% LTV HELOC loan, but as I said, I never went to finalize it cause of the layoff.

    I guess the maxed out CC's and an average of 1-2 30 day lates on some of the cards is what has knocked my score down by 100 points or so.


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